Month: September 2020

Santander, the Spanish multinational banking giant, is announcing that its fintech venture arm is to be spun out and will be managed more autonomously going forward.

Previously known as Santander Innoventures and first established in 2014, the VC is being re-branded to Mouro Capital. It will continue to be headed up by general partner Manuel Silva Martínez, who joined Innoventures five years ago and has led the fund since 2018, and senior advisor Chris Gottschalk, who joined from Blumberg Capital last year.

Noteworthy, despite its new-founded independence, Santander will remain Mouro Capital’s sole investor/LP, including doubling its current commitment, seeing the VC have $400 million in allotted funds.

However, my understanding is that by being managed autonomously from the multinational bank, Mouro will be able to invest more nimbly, including placing bets adjacent to pure fintech or financial services and in startups that could more directly compete with Santander’s own product lines. It should also help remove any market perception that portfolio companies aren’t independent of the incumbent bank, in terms of future investment or partnerships with Santander competitors.

Meanwhile, Santander Innoventures was an early backer of a number of so-called unicorns (companies valued at more than a billion dollars). They include Ripple, Tradeshift, and Upgrade. It has sees a number of exits, too, including iZettle to PayPal in 2018 for $2 billion, and Kabbage acquired by Amex last month.

“Mouro Capital aims to bring its fintech expertise, global network and strong track-record in successful investments to early and growth stage startups globally. The fund will continue to deploy capital across Europe and the Americas, primarily leading investment rounds with initial investments of up to $15 million and further follow-on reserves,” says Santander.

I put written questions to Mouro Capital general partner Manuel Silva Martínez to find out more. The following Q&A has been lightly edited.

TechCrunch: What does this enable the fund to do that it couldn’t already? Does its independence enable it to be more aggressive with investing in products that could compete directly with Santander’s own services and products? Or it is more about speed in relation to the investment committee making quicker decisions?

Manuel Silva Martínez: Santander InnoVentures was fairly optimized as a corporate venture capital fund in terms of operations and speed of investment. However, the evolution into the Mouro Capital structure allows for extra alignment with entrepreneurs and co-investors (their success being the #1 objective), even faster/nimbler processes, and potentially a bolder investment strategy within the themes and investment policy agreed with our Limited Partner.

Shifting to a separate brand also reduces any potential affiliation that entrepreneurs may fear as potentially conflicting (commercially, IP), further reassured by a cleaner legal separation. On the change of the investment policy point, indeed Mouro will deploy a bolder investment strategy, that may involve investing in perceived competitors (which has been done in the past, e.g. neobank Klar in Mexico, lender Creditas in Brazil, or Curve in the UK), but this still fits into the logic that, if a venture capital affiliated with an industrial player should be a lighthouse for the ‘industry to come’, investing in emerging competitors that may reshape the future/long-term competitive landscape is just as aligned as any other topic.

In addition to that, Mouro will also explore the ‘boundaries’ of financial services, so you can expect to see Mouro invest from time to time in areas such as proptech, mobility, logistics, edtech, etc.

How big is the current team in terms of investment members and other support? And how is this going to change going forward? i.e. further operational/portfolio support or new investment partner members etc.

The current investment team has six members, with the Finance, Legal/Compliance and Communications also internalised (so, extra three people). The team will indeed grow. Still early to say, but we would expect the investment team to add another 3-4 professionals with backgrounds aligned with our values (fintech expertise, entrepreneurial/operational expertise, exposure to specific networks we are interested in, esp. in Europe).

In addition to that, we will be building a ‘business development’ and operations support team to assist our companies with their growth needs and also with building mutually beneficial relationships with Santander and across the portfolio.

Aside from being broadly fintech/financial services focused, perhaps you can share a bit more on the Mouro thesis going forward.

As you say, we take a very broad view to the future of financial services, looking even beyond today’s industry boundaries. We ask ourselves fundamental questions and build strong theses around topics we are passionate about while keeping an open mind to new ideas that challenge our beliefs. In a way, we operate along three horizons that are complementary in addressing different angles of where we see the industry going:

• In the short term, we invest in technologies that allow incumbents to make the transition into digital throught better processes. Questions like: how can we bring automation and real-time applications into banking infrastructure? How can we build richer data ecosystems? What new client value propositions are emerging in developed and developing markets? How can banking services be delivered through APIs? How can finance be embedded in third-party journeys?

• There are also companies that have superior capabilities (technology, data science, installed capacity) that, combined with banks or other startups, could build new businesses or re-engineer businesses from scratch. Questions like: how are novel technologies and new engineering paradigms (artificial intelligence, blockchain, quantum computing) changing how banks work? What emerging enterprise software utilities and platforms will be the gateway to tomorrow’s financial services? This is about building new businesses within the status quo of today’s industry by lining up the right resources and players.

• More for the long term, we also look at how the industry is meant to evolve and reinvent itself, potentially by even transcending itself and crossing over with other industries to create new white-spaces. Questions like: how can industries be more integrated and converge into new white spaces fueled by finance? What is the role of money in a data-rich world?

The United States government will not extend the September 20 deadline for Beijing-based ByteDance to sell TikTok, President Donald Trump said on Thursday. This adds urgency to negotiations because TikTok may be banned in the United States if it can’t reach an agreement with a buyer.

“We’ll see what happens. It’ll either be closed up or they’ll sell it,” Trump said before boarding Air Force One at Joint Base Andrews. Some analysts had predicted that the deadline would be extended because of the sale’s complexity.

Trump issued an executive order last month claiming there is “credible evidence” that ByteDance “might take action that threatens to impair the national security of the United States.” ByteDance was already in negotiations with Microsoft for a sale. Several other large American tech companies have since reportedly entered into talks with popular video-sharing app–but potential new roadblocks to a deal have also emerged.

Despite TikTok’s larger user base and value as one of the most popular social media apps among Gen Z, there are currently several issues that may lower its attractiveness for buyers.

For example, the software code used in ByteDance’s apps, including TikTok, are developed by engineers and developers at its Beijing headquarters. This makes separating TikTok from ByteDance more complicated on a technical level. Another factor is an update China made two weeks ago to export control laws that cover artificial intelligence technologies. TikTok’s AI-based algorithms, which shows new content to users depending on their interests and browsing history, are valuable and a huge part of its success. After the export control policy update was issued by China’s Ministry of Commerce, ByteDance said it will “strictly follow” the new rules, but that might prevent ByteDance from including TikTok’s personalized recommendation and AI-based technology in a sale, making it a less attractive acquisition.

In addition to Microsoft, contenders for TikTok reportedly include other American tech heavyweights like Twitter, Google and Oracle. Walmart has even put itself forward as a buyer, in a potential partnership with Microsoft.

TikTok’s security is also under a magnifying glass in several other countries. For example, it was among a roster of Chinese apps banned in India  over “national security and defence” concerns,” and is currently being investigated by French data security watchdog CNIL.

TikTok has fought back against those claims. Last month, it sued the Trump administration, stating in an announcement on August 24 that it “we strongly disagree with the Administration’s position that TikTok is a national security threat.”

In its complaint, TikTok said it has taken “extraordinary measures to protect the privacy and security of TikTok’s user data” by storing data in the U.S. and Singapore, and creating barriers between TikTok’s U.S. user data and the data of other ByteDance products like Douyin.

Since launching in 2017, TikTok, ByteDance’s international version of Douyin, has become firmly entrenched in internet culture, especially among Gen Z. In the U.S. alone, TikTok says it has over 100 million users in the U.S. and employs about 1,500 people.

Even though several apps, including Instagram, are trying to position themselves as TikTok alternatives with similar short-form video sharing features, no frontrunner has emerged so far. In fact, a new report by analytics firm Sensor Tower said that in August, TikTok was the most downloaded non-gaming app worldwide, with more than 63.3 million installs. TikTok users are so committed to the app that at least one VPN provider, ExpressVPN, saw a spike in traffic after the U.S. government proposed a potential ban in July.

Some cybersecurity experts say that TikTok’s data collection practices are similar to other social media apps that depend on advertising revenue. But a major concern revolves around its ownership by a Chinese company that may be forced to capitulate to demands for data by the Chinese government. A Chinese cybersecurity law requires Chinese tech companies, like ByteDance, to comply with government’s requests for user data. ByteDance has said it would resist attempts by the Chinese government access TikTok’s user data

Security concerns about TikTok also increased after a Wall Street Journal analysis published in August found that TikTok went around an Android operating system feature designed to limit how much data, including unique identifiers called MAC addresses, that apps can collect from users. According to the WSJ, TikTok stopped collecting unique identifiers in November, but its investigation raised questions about TikTok’s commitment to protecting user privacy. In a statement to the WSJ, TikTok said “like our peers, we constantly update our app to keep up with evolving security challenges.”

It’s not just Republicans who are taking a stance against TikTok. In July, Joe Biden’s presidential campaign reportedly asked its staff to remove TikTok from their work and personal devices.

The U.S government’s scrutiny of TikTok began escalating last year when Sens. Charles Schumer (D-NY) and Tom Cotton (R-AR) asked Joseph Maguire, then the acting director of national intelligence, to assess if TikTok can be forced to turn over American users’ data to Chinese authorities.

The company building the virtual border wall has a new version of its stealthy fast-flying drones — and a fresh contract with Customs and Border Protection to match. Anduril, a young defense-friendly tech company from the founder of Oculus, received $36 million from Customs and Border Protection this month for its AI-powered autonomous surveillance towers.

Anduril has flourished over the course of its short Trump-era lifespan, attracting surprising interest from defense agencies considering that the company has only existed for three years. In July, CBP awarded Anduril $25 million for a previous set of surveillance towers. The agency plans to implement 200 towers by 2022 in an ongoing relationship with the contractor worth more than $200 million.

The unusual company is iterating on its hardware innovations quickly, which makes sense for a company founded by Palmer Luckey, the controversial figure who spearheaded consumer VR through Oculus. Luckey, a big Trump booster in tech, attracted plenty of talent from the now Facebook-owned VR company when he struck out with his new venture. The company has also collected a number of former employees from Peter Thiel-founded Palantir, which grew its own federal contract business and is in the process of going public.

While the company kept completely quiet in its early launch days, it’s opened up about its drone capabilities in particular over the last year. Anduril previously did a press push around the launch of a counter-UAS drone it calls “Anvil” that can identify a target and knock it out of the sky. (The company would prefer if you don’t call them “attack drones.”) Now, Anduril is launching the fourth iteration of its small, ultra-quiet “Ghost” drones, adding some key features.

Ghost drones are capable of staying aloft for long stretches and communicating what they sees to a central AI-powered nervous system. They combine data with Anduril’s sentry towers and any other hardware, relaying it back to the company’s Lattice software platform, which flags anything of interest. In the case of CBP, that looks like a system autonomously identifying someone crossing U.S. border and sending a push alert to border agents.

Ghost 4 is the latest version of the Ghost drone, boasting 100 minutes of flight time and a “near-silent acoustic signature” that makes it difficult to detect. The Ghost 4 drones now apparently pack Anduril’s Lattice AI software on board, which allows them to operate and identify potential targets in spots with low connectivity or “contested” areas. The new version of the Ghost drone also allows one operator to command a group of Ghost drones to form a swarm, collecting data across many devices.

According to the company, the Ghost 4 is designed for an array of mission types, including “aerial intelligence, surveillance and reconnaissance, cargo delivery, counter intrusion, signal intelligence and electronic warfare.” With the system’s modular, customizable design, Anduril continues to cast a wide net, though for now it’s mostly won contracts for perimeter and border surveillance.

The company began its work with CBP through pilot programs in Texas and San Diego starting in 2018. By the following year, Anduril had formalized its relationship on the U.S. southern border, with a number of its sentry towers operating in CBP’s San Diego sector, an order for more in Texas and a new pilot program testing a cold weather variation of its hardware at northern border sites in Montana and Vermont.

In July, Anduril announced that it had raised $200 million from investors including Andreessen Horowitz and Thiel’s Founders Fund, bringing its valuation to around $2 billion three years in. “We founded Anduril because we believe there is value in Silicon Valley technology companies partnering with the Department of Defense,” Anduril CEO Brian Schimpf said at the time.

The Department of Defense was exploring use cases with a previous version of the Ghost drone, and it’s clear the company would like to expand that nascent business. It’s not that far off: Anduril landed a $13.5 million contract last year to surround Marine Corps bases in Arizona, Japan and Hawaii with a “virtual ‘digital fortress'” and has recruited talent specifically to liaise with the military. Now that the company’s work is established as a line item in the homeland security budget, the door is open for Anduril to seal the deal on even more lucrative defense work.

Some people may have slowed down in 2020, amid a pandemic that has shut down much of the world. Not Chamath Palihapitiya.

According to a new report in Bloomberg, Opendoor, the seven-year-old, San Francisco-based company that has from the outset aimed to help people buy and sell homes with the “push of a button” (or nearly), is in advanced talks to go public through a merger with Social Capital Hedosophia Holdings Corp. II.

The outlet says the blank-check company, which raised $360 million in April and is led by Palihapitiya, is “discussing raising fresh equity to help fund the transaction with prospective investors” and that the combined company would be valued at around $5 billion in the deal. It adds that the nothing has been finalized and that the deal could still fall apart.

We reached out to both Opendoor CEO Eric Wu and to Palihapitiya for comment. An Opendoor spokeswoman said the company has no comment; he have yet to hear back from Palihapitiya but will update this story when we do.

Assuming the deal is fairly far along, and at a $5 billion valuation, one could see the appeal for Opendoor, which was last valued by private investors at $3.8 billion and which, like many other venture-backed outfits, has had a topsy turvy 2020.

In April, it laid off 600 employees, or 35% of workforce at the time, citing the “unforeseen impact on public health, the U.S. economy, and housing,” prompted by COVID-19.

In recent months, however, home sales around the country have been brisk, spurred by low mortgage rates and a heightened appetite for more space, particularly outside of crowded cities. According to a late-August report by the National Association of Realtors, U.S. home sales rose an unprecedented 24.7% in July, up 8.7% from the same time last year. Home sales rose 20.7% in June, too (which was a record at the time).

Opendoor is also a brand that many retail investors already know and can easily understand. In fact, its consumer appeal isn’t so unlike that of the space tourism company Virgin Galactic, which Palihapitiya’s first blank-check company ultimately went on to acquire after it raised $600 million in 2017. The combined outfit went public last October with a $2.3 billion market capitalization; its market cap is now above $4 billion.

As for what Palihapitiya might do with a third special purpose acquisition vehicle — it raised $720 million, also in April of this year — stay tuned. The company has said it will use those IPO proceeds to buy a company in the tech sector, primarily outside of the United States.

In the meantime, Palihapitiya is separately investing in Desktop Metal, a Burlington, Ma., company set to go public via a separate SPAC. Specifically, Desktop disclosed plans last week to list on the New York Stock Exchange by merging with Trine Acquisition Corp, a blank check company that raised $261 million in March of last year. Palihapitiya helped lead a $275 million PIPE (for private investment in a public equity) investment to finance the deal.

Yesterday, we had a chance to catch up with Josh Kopelman, the founder of the now 16-year-old early-stage venture firm First Round to talk about a wide variety of issues. As part of that conversation — which we’ll run in its entirety in podcast form a bit later this week — we naturally asked Kopelman about some of the big changes afoot in the venture industry right now, including the special purpose acquisition vehicles (SPACs) that are being raised left and right, the rolling fund concept that is gaining traction, and how First Round is thinking about diversity.

We’ll be covering all of these issues next week at our Disrupt show with a wide variety of top VCs (you don’t want to miss these talks).

Knowing that Kopelman is also well-regarded by founders, we thought you might be interested to learn what he thinks about some of these newer developments, too. Our chat has been edited lightly or length and clarity.

TC: Your own industry has obviously changed quite a bit since you founded First Round. There are now hundreds of firms that are going after early-stage deals. How have your results been impacted by what’s been happening in the market? Are still getting the same return on investment that you did in the past?

If you’re talking about changes in the last five years, no one’s results are in, so for me to talk about unrealized markups over the last five years, sure, they look fine. But I’ve been in this business long enough to realize that there’s a big difference between realized and unrealized [gains]. But in general, if you look at the intermediate metrics, companies where we lead their first round have twice as high a chance of raising their next round than the industry average. So we’re still seeing promising signs, but we recognize that what was a contrarian idea 15 years ago — institutional seed — is now a very consensus idea.

TC: Results take time in part because  companies have obviously waited longer and longer to go public over the last decade or so. Do you think that the IPO process is broken? We’re seeing a lot of people saying we need new vehicles to get startups across the threshold.

I’m not sure I’d argue that it’s broken. I think you’re seeing far more companies exit, and we’ve seen a real acceleration in both the number of exits and the size of those exits, which is a promising thing.

I do think there is a benefit to the transparency that a public market shines on a company, because it’s how you truly lock in a value. We’ve all seen companies that have real garnered valuation x in the private markets, only to find that it wasn’t a true representation of the company’s ultimate value when it was fully transparent in the public markets.

Now with SPACs, that’s a whole new element that’s coming in.

TC: What do you think of them?

On the one hand, just for fun, I made sure that we owned Lastround.com in case we ever wanted to launch our SPAC. [Laughs.]  But it’s hard to know the true benefit of a SPAC. And I think that now that we’ve begun to see a market shift toward allowing direct listings with a fundraising component, you might see that as a far more viable and frequent fundraising or a liquidity device.

TC:  What do you think the advantages are of direct listings versus SPACs?

I think direct ratings are more economical. You aren’t allocating a heavy portion of the cap table towards a promote. [Editor’s note: SPAC sponsors acquire founder shares for nominal consideration that typically ends up with them owning 20% of the outstanding common stock.] They’re not warrants that are performance based. It’s very clear that what you’re really doing is just finding the right market-clearing price for the company.

As I’ve watched the last few years develop, I sort of thought of myself in camp Gurley [meaning as a proponent of direct listings].

TC: When you have portfolio companies that are maybe asked if they might be interested in using a SPAC to go public–

That’s happening.

TC: So what do you say? How do you advise them?

It would be foolish to have a conversation about one absent the alternatives, right? You should be sitting down and having the conversation of, ‘Alright, what are you solving for? Is it liquidity? Is it a capital raise? Is it public currency? Is it to be able to offer your earliest employees the liquidity and cash to benefit from the time they’ve put in?’ You have to look at all the options. I don’t think it would ever make sense to look at a SPAC without looking at the options. I also think if you’re contemplating a direct listing, you should look at the benefits or drawbacks of a SPAC as well.

TC: What you think of these rolling funds that allow managers to share deal flow with fund investors on a quarterly subscription basis?

JK: I think it’s very creative. I’ve personally participated as a limited partner in some of them. When I started first round with Howard Morgan back in 2004, neither of us were sure [about how long we’d do this]. We had three questions when we started. Number one was, would I enjoy being a VC rather than an entrepreneur? Question number two was could I overcome my geographic handicap, because at the time I was living in Philadelphia, and most of the companies that that we were funding were on the West Coast. And question number three was ‘Am I any good at [VC]?]’ So I had a really hard time raising a traditional fund vehicle. I didn’t have a hard time in the capital markets. I had a hard time signing up to make a 10-year commitment to [the job].

FRC I is really a bunch of one-year funds. We raised funds for a one-year period of time where we said,

So instead of that I chose to sort of the first, you know, for FRC, one is really a bunch of one year funds, we raised funds for a one year period of time where we said, All right, like, we’ll invest in 2005 and see how we like it, and if we like it, we’ll raise another fund in 2006. And then we’ll do it in 2007. And after about three years, I got enough confidence on my answers to those three questions that I felt comfortable signing up to a 10-year tour of duty. So I think that anything that enables people who might want to explore a career in investing, and to be able to pursue it and to explore it without having to sign a 10-year commitment, is a really powerful thing.

TC: You mention Howard Morgan, who has since moved on to a chairman role at the investment firm B Capital. A lot of VCs are moving on from active investing roles. How are you thinking about success at First Round? Is this a brand that you feel strongly should exist 20 years from now? The industry seems to be evolving in a way where the emphasis is on individual players versus the shingle above the door.

JK: Personally, I’m not going anywhere anytime soon. I enjoy what I’m doing. I think we have a very strong team in terms of the future. We are actively looking for a new partner right now.  I think that in a world where capital is increasingly available, what differentiates more than anything is the brand.

When First Round was first getting started, there were so few seed funds that it was like walking into a Footlocker and seeing just three sneakers on the shelf. A founder could try on all three and kind of see which fit, then pick. But today, when you walk into that shoe store and you see 1,000 shoes on the shelf, it’s really hard to know where to go first. And and we believe that the brands that have proven their ability to create winners before really matter. Just like Nike is defined by the entrepreneurs who have benefited from its product, I think brand actually matters more now than ever before.

TC: You’re hiring a new partner. Obviously, diversity has been a big issue for VCs and entrepreneurs in the startup world. What are you doing to encourage diversity, not only within your fund, but also within your portfolio companies?

JK: We took the step of actually posting a public job description for it, and a call for applications [because]  all too often partner recruiting gets done in inside of proprietary networks. We’re guilty of doing that. If you look at my three other investing partners, Bill or Haley or Todd, the one thing all three have in common is that previously, they were all founders of a First Round company.

So rather than just fishing within our own community, we’re trying to go beyond that and are running an active process of trying very hard to make it a fair and open process. We were very influenced influenced by a blog post by Brian Dixon at Kapor Capital,  where he said if you don’t publicize the jobs that are available at your venture firm, then you’re intentionally being exclusionary. People can’t get a job that they don’t know exists.

We agree with him, so we’re focusing on trying to find new sources of prospective partner talent. We have a number of initiatives throughout our firm, [including] a pledge we recently signed to make sure that every term sheet we put out preserves allocation for funders of color or underrepresented funders. So not only are we thinking about diversity inside our firm, or inside of a company, but we’re also thinking about diversity on the cap table.

We’ve [also] been running a number of training programs, and we have a pretty strong process with new investments to help them focus on building diverse talent pipelines as they hire, because one of the things we’ve seen is that if you don’t focus on building a diverse team in your first 10 hires, it gets much harder to expand because people tend to hire from within networks. If you start off lacking diversity, it just gets harder later.

TC: Many questions have been raised about the culture of Silicon Valley in recent years, but it feel like there are suddenly more clashes between investors and the journalists who cover tech, too. Do you have any thoughts about why?

I wouldn’t say that I have any particularly profound thoughts. I think that what we’re seeing is that whereas tech used to be a separate ecosystem, tech is now part of everything. You no longer have sort of healthcare tech. It’s just like health care. You’d no longer have consumer or social tech, it’s just part of the fabric of the world.

So I think, rightly so, you’re seeing journalists who were maybe previously sort of tied up in the ecosystem now have to a cast a more skeptical eye on what’s happening in tech. I think it’s just part of the maturation process. And I think the more that tech grows to represent all industries. I think you’re going to see all journalists covering tech.

Facebook returns to its college roots, Alexa gets a printing feature and we take a deep dive into Unity’s business. This is your Daily Crunch for September 10, 2020.

The big story: Facebook launches a college-only network

If you’re old and decrepit like me, you remember when Facebook was only for college students and required a college email address to join. Well, it seems everything old is new again, because the company is piloting a new feature called Facebook Campus … which is only for college students and requires a college email address to join.

Facebook’s Charmaine Hung argued that the product is particularly relevant now: “With COVID-19, we see that many students aren’t returning to campus in the fall. Now, classes are being held online and students are trying to react to this new normal of what it’s like to connect to clubs and organizations that you care about, when you’re not together.”

Of course, this could also be a way for Facebook to try to stay relevant to a younger demographic, before they move on to other apps.

The tech giants

Amazon launches Alexa Print, a way to print lists, recipes, games and educational content using your voice — The feature works with any second-generation Echo device or newer, as well as a range of printers.

Google says it’s eliminating Autocomplete suggestions that target candidates or voting — The company says that it will now remove any Autocomplete predictions that seem to endorse or oppose a candidate or a political party, or that make a claim about voting or the electoral process.

Microsoft Surface Duo review — Brian Heater calls it a beautiful, expensive work in progress.

Startups, funding and venture capital

Orchard real estate platform raises $69 million Series C led by Revolution Growth — Orchard (formerly Perch) launched in 2017 with a mission to digitize the entire experience of buying and selling a home.

How Unity built a gaming engine for the future — Eric Peckham offers an in-depth look at the company’s financials as it prepares to go public.

India’s Zomato raises $100M from Tiger Global, says it is planning to file for IPO next year — In an email to employees, CEO Deepinder Goyal said the food delivery startup has about $250 million cash in the bank, with several more “big name” investors preparing to join the current round.

Advice and analysis from Extra Crunch

Use ‘productive paranoia’ to build cybersecurity culture at your startup — We asked Casey Ellis, founder, chairman and chief technology officer at Bugcrowd, to share his ideas for how startups can improve their security posture.

What’s driving API-powered startups forward in 2020? — It’s not hard to find startups with API-based delivery models that are doing well this year.

(Reminder: Extra Crunch is our subscription membership program, which aims to democratize information about startups. You can sign up here.)

Everything else

Announcing the Startup Battlefield companies at TechCrunch Disrupt 2020 — This is our most competitive batch to date.

$3 million Breakthrough Prize goes to scientist designing molecules to fight COVID-19 — David Baker’s work over the last 20 years has helped validate the idea that computers can help us understand and create complex molecules like proteins.

Recorded music revenue is up on streaming growth, as physical sales plummet — With vastly more people stuck inside seeking novel methods of entertainment, paid subscriptions are up 24% year-over-year.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

The whole crew was back, with Natasha Mascarenhas and Danny Crichton and myself chattering, and Chris Gates behind the scenes tweaking the dials as always. This week was a real team effort as we are heading into the maw of Disrupt — more here, see you there — but there was a lot of news all the same.

So, here’s what we got to:

• AngelList is doubling down on rolling funds, driving that SaaS revenue into the firm that is also investing in the rolling funds. So that’s neat. (Really!)
• Edtech stayed hot this week with Byju’s raising $500 million from Silver Lake. Founded back in 2011, Byju’s is the highest-valued edtech company that we can think of, now worth $10.8 billion.
• And speaking of Silver Lake, the group just poured $1 billion into a part of the Reliance empire, this time Reliance Retail. And we talked about JioMart, which is taking on both Flipkart and Amazon in the country.
• Next there were two companies with names that start with “S” that raised $100 million in the last week, namely Snyk — more here — and Sprinklr — more here.
• Sticking to our “S” theme, Slack’s earnings were incredibly interesting. The company’s quarter didn’t get plaudits from investors, and it did note some negative COVID impacts that could impact startups as well.
• And, one more S-company to get through: Snowflake. We were all a-twitter about the company’s new valuation range and fact that fucking Berkshire Hathaway is going to invest in it. That’s wild! What a thing!
• Finally on the IPO front, we did a quick Palantir update. Danny has all the latest here.

We wrapped with whatever this is, which was at least good for a laugh. We are back next week at Disrupt, so see you all there!

It looks like those reports about Apple’s forthcoming subscription bundle were accurate. According to strings of code found within the latest release of the Apple Music app for Android devices (ver. 3.4.0 beta), Apple references a new product it’s calling “Apple One.” The code, which was discovered by 9to5Google, also indicates that Apple Music will be included with the Apple One subscription bundle.

These aren’t just good guesses based on vague code references, either. In one part, Apple makes a very clear statement about what Apple One will be and how it involves Apple Music.

It says:

<string name=”aristotle_main_more_info”>Your Apple Music subscription will be included in Apple One starting %s. You will not be charged for both subscriptions.</string>

<string name=”aristotle_renewaloption_subtext”>You can manage your Apple One subscription using your iPhone, iPad, Apple TV or Mac.</string>

The reference to “aristotle” is likely Apple’s internal code name for the new product.

The other key sections of code read, as follows:

<string name=”applemusic_with_aristotle_subtext”>Included in Apple One %s</string>

<string name=”aristotle_main_subtext”>Subscription Bundle %s</string>

The finding essentially confirms Bloomberg’s reporting from earlier this year which said Apple was poised to launch an Apple One subscription bundle this fall, likely alongside the iPhone 12. The idea with the new bundle is to encourage Apple customers to subscribe to multiple services by offering discounts on various groups of services. Bloomberg had said a basic package would include Apple Music and Apple TV+, while more expensive tiers would add in other services like Apple Arcade and Apple News+, and even an iCloud subscription.

Unfortunately, none of the newly discovered code detail the new bundle’s pricing or what else it may include.

It’s somewhat funny that Apple, a company that notoriously seeks out ways to crack down on product leaks, has been the source for several recent leaks itself. In addition to this latest confirmation of Apple One, the company in April accidentally confirmed the existence of an unreleased product, “AirTags,” via a support video it uploaded to its own YouTube account.

This wasn’t the first time Apple’s own code hinted at its services bundle, either. 9to5Mac had earlier discovered internal files within iOS 13.5.5 that included mentions of a “bundle offer” and “bundle subscription,” that hadn’t been seen in prior iOS versions.

However, today’s leak does confirm Apple has actually settled on the name “Apple One” for its bundle product.

Perhaps we’ll learn more at Apple’s event next week, where it’s expected the company will focus on iPad and Apple Watch. Or perhaps we won’t hear about Apple One until October, when Apple is expected to announce the iPhone 12.

 

The Breakthrough Prize Foundation announced $21.75 million in awards today for a variety of scientific achievements. One in particular is a tech/science crossover: A $3M award to David Baker, whose work over the last 20 years has helped validate the idea that computers can help us understand and create complex molecules like proteins — and the latest such molecule may lead to new treatments for COVID-19.

Baker is the head of the Institute for Protein Design at the University of Washington, and for two decades has helped explore and define the field of computer-aided molecular biology. His lab developed the Rosetta software for modeling the immensely complicated folding and other interactions of proteins, and also the FoldIT distributed computing network for spreading the task around to eager citizen scientists.

As Bakers says: “We could wait another million years for the protein we need to evolve, or we could design it ourselves.”

The prize is specifically for “For developing technology that allowed the design of proteins never seen before in nature, including novel proteins that have the potential for therapeutic intervention in human diseases.” This acknowledges Baker and his colleagues’ role in the technology as a whole, but his latest work may prove his most widely consequential: a bespoke molecule made specifically to blunt the sharp spikes of the novel coronavirus.

It’s the molecular equivalent to putting a scabbard on a sword. The only problem is that the sword doesn’t come with the scabbard — you have to make it yourself. And that’s a lot more complicated than it sounds, since there are so many factors in how the amino acids, atoms and bonds interact between the two. Fortunately that’s exactly the problem Baker and his team have been building a platform to solve.

“We have developed general design methods for creating proteins from scratch that are complementary in shape and chemical properties to arbitrary target sites,” Baker told TechCrunch. “We simply pointed these at the virus spike!”

The “de novo” proteins created and tested by the team bind strongly to the spike protein and don’t let go — hence their name, “hyperstable minibinders.” It’s no miracle cure, but it could be the start for a therapeutic approach that disables the virus’s method of spreading — once it’s been properly tested, of course.

“The designed protein described in the Science paper published today is looking very promising,” Baker said. “We are doing pre-clinical experiments to determine whether it could be an effective drug as is or needs to be modified.”

He also noted that “FoldIT players and Rosetta@home participants have been making important contributions to our anti-COVID efforts,” so good job if you’ve been donating computer cycles to the project.

You can see the many other prizes awarded this year, in topics such as Mathematics and Fundamental Physics, at the foundation’s news post here.

The Breakthrough Prize Foundation was originally born from the efforts (and coffers) of Yuri and Julia Milner, and the prize for Life Sciences is co-sponsored by Sergey Brin, Priscilla Chan and Mark Zuckerberg, Pony Ma and Anne Wojcicki.

Verishop, the Los Angeles online retailer founded by former Snap executive Imran Khan, launched a little over a year ago to change the way people shopped online. Now the company is launching a new initiative called “Verified Shops” which looks to change the way that up-and-coming retail brands can sell their wares. 

As direct-to-consumer and upstart brands look for new ways to sell, they’re increasingly turning to online partners to grow their businesses. Chiefly, the concern is that some retailers have been overrun with counterfeit products or unauthorized sellers that undercut pricing and dilute the brand’s value with knock-off products, the company observed.

So Khan set out to change the selling experience for these new companies that want to have a better way to communicate with their potential customers… a way to really tell their story online.

“We started with the big brands,” Khan said. “[Now] we’re launching ‘Verified Shop’ where any DTC brands can sell on our platform. They have to get through an approval process and verify that you’re a real direct to consumer brand you can  sell on the platform.”

That pitch appealed to retailers like David Manshoory, the founder of the popular cosmetics brand, Alleyoop.

“Right now we don’t work with any other ecommerce retailers,” said Manshoory. “Verishop was the first online only retail partners, because they’ve got a really large audience of customers that are in our demographic.”

The year-old cosmetics brand went with Verishop because the number of retailers and types of sellers on the platform “seemed very curated”, according to Manshoory. “There are brands in there that we recognized and respected.”

The revenue share program that Verishop has created for the newer, smaller consumer brands that join the platform is also straightforward, Manshoory said. Brands in the Verified Shops channel only pay when they make a sale  and it’s just 10 percent to 15 percent, depending on the category, according to the company. 

“Because they’re not buying inventory upfront they take a lower cut… which was a reason why i was attracted to it,” said the cosmetics company founder. “We can get started right off the bat once the integration is up… we have full control over our store.”

Verishop also managed to win over other online direct-to-consumer darlings like Greats (which was recenty acquired by Steve Madden), Dagne Dover, Athletic Propulsion Labs, Judy, and The Ridge.

“Ecommerce still starts in 1990,” said Khan of the traditional shopping experience. “It’s a search-based experience that’s phenomenal if you know what you’re looking for.” However, as brands proliferate and consumers look to identify with particular brands and brand stories more closely, the question becomes how to find those new companies that are selling the types of products that resonate with particular shoppers.

It’s the question that Verishop has set out to solve and the company is hoping that Verified Shops can be the onramp for the newest consumer brands to reach a millennial audience. Think of it as an online mall where a curated shopping ecosystem exists for each brand to develop its own digital storefront and tell its own story.

“Right now we sell fashion and home and beauty, but longterm why can’t you buy a car?” Khan asked. “It’s this virtual mall or virtual shopping strip that you can walk through and discover and learn and hang out. We let the brands tell the story and let the consumers discover the stories.”

Unlike other attempts to create a front end digital storefront experience for brands, Khan said that Verishop is differentiated by its focus on a backend ecommerce infrastructure and logistics capabilities that other virtual malls can’t match.

Brands can apply to appear on Verishop and once they’re selected as verified shops they’ll have the chance to tap into a customer base that’s mostly comprised of Gen Z and millennial shoppers.